Is your business presently strong enough to survive a recession? If NO, here are 10 strategies that will help your business survive the coming recession like the one caused by Corona Virus or the global financial meltdown?
These were the exact questions thrown to me by my protégés while I was speaking to them on how to build a successful business during a recession. So if you seek answer to any of the questions asked above, please read on.
“Be courageous. I have seen many depressions in business. Always, America has emerged from these stronger and more prosperous. Be brave as your fathers before you. Have faith! Go forward.” – Thomas Edison
“I started The Body Shop in 1976 simply to create a livelihood for myself and my two daughters, while my husband, Gordon, was trekking across the Americas. I had no training or experience and my only business acumen was Gordon’s advice to take sales of £300 a week. Nobody talks of entrepreneurship as survival, but that’s exactly what it is and what nurtures creative thinking.” – Anita Roddick
The global financial meltdown has come and gone but the ripples and effect will still remain fresh in the minds of many people for years to come. To those who were prepared, the economic recession was the best of times and to those who weren’t prepared; it was the worst of times. The global economic recession came like a tsunami and swept away lots of businesses; both big and small.
But despite the massive loss experienced by so many small and big business owners, there were still some die hard successful entrepreneurs who refused to be cowed by the global economic recession. Like every other entrepreneur, I was also hit by the recession but my businesses stayed afloat and survived. How did I do it?
The economic recession is not completely over so I deem it wise to share with you some of the business survival strategies (recession strategies) I implemented that kept my small cap companies afloat even when heavily capitalized companies such as Lehmann Brothers and Merrill Lynch were filing for bankruptcy. If you are ready to learn, then tighten your seat belt and read on.
Recession Strategies: How your Small Business Can Survive a Recession
“The wise man put all his eggs in one basket and watches the basket.” – Andrew Carnegie
This was the first step I took when the recession set in. Immediately the signs of an impending recession filtered in, I sold majority of the stocks I owned and used some of the cash to tighten up my personal financial statements. I also made sure my companies sold majority of the stakes they own in quoted companies and the cash pulled out was used to strengthen our balance sheet.
Now what was the motive behind this strategic move? We took this move because we knew a severe drop in stock prices and value is usually what followed a recession, so instead of sitting and watching the value of our investments go zero; we exited.
Secondly; we exited all other investments because we wanted to make sure our businesses were well positioned to adapt to the economic changes that follows every recession and for that to be achieved; we needed to be focused on our business.
“Concentrate your energy, your thoughts and your capital.” – Andrew Carnegie
The third reason we made that move is this; if we could keep our business strong through the recession, then our business will grow stronger with the recovery of the economy and we will be able to buy back much more investments than we sold.
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” – Warren Buffett
So business survival strategy number one is to exit all other investments and focus on your business. If you do this diligently and strategically, your business will survive any recession and provide you enough cash flow to buy back twice the investments you sold.
The next small business survival strategy my team implemented during the recession was to gain a stronger control of our cash flow. To survive a recession, it is advisable you keep an eagle eye on your cash flow.
“The most important word in the world of money is cash flow. The second most important word is leverage.” – Rich Dad
My team and I made sure that our cash flow stays positive throughout the recession. We worked closely with our customers to make sure they meet their credit obligation. We strived to make sure cash continuously flowed into our businesses. Cash flow is the life blood of business so I am sure you don’t want to joke with it.
“There is one paradoxical characteristic every entrepreneur must possess to succeed. An entrepreneur must be able to persuade his debtors to pay their debts promptly and at the same, must tactically delay payments to his creditors.” – Ajaero Tony Martins
“Know your numbers’ is a fundamental precept of business.” – Bill Gates
3. Cut back on unnecessary expenses
“Watch the costs and the profits will take care of themselves.” – Andrew Carnegie
The third recession survival strategy is to cut back on all unnecessary business expenses. To survive a recession, you must be careful with respect to business expenditures. If your business spends money on frivolous things such as parties, bonuses, vacations, incentives and any other thing that has no direct impact on your company’s growth, then it’s time to cut back on them.
“IKEA people do not drive flashy cars or stay at luxury hotels.” – Ingvar Kamprad
4. Increase your budget and expenses with respect to marketing and advertising
“The aim of marketing is to know and understand the customer so well that the products or service fits him and sells itself.” – Peter F. Drucker
One of the silly mistakes made by most managers during a recession or decline in sales is to cut back on the marketing budget. Instead of cutting back on the marketing budget, I advice you spend more on marketing. Instead of going into hiding, I will advise you do some marketing and let your customers know you will stand by them even in the face of a recession.
“Advertising is the mouth piece of business.” – James R. Adams
Most times, I also apply this business survival strategy to my personal life. Whenever I am strapped for cash; instead of reducing my expenses and hoarding some cash for emergency purposes, I expand my means. All I do is to look for quality products at affordable prices and hit the roads to do some marketing. So a good thumb of rule to surviving a recession is to spend more on marketing and advertising when strapped for cash; be it in your personal life or business.
5. Run your business on pay as you go
This strategy is really important if you have your business survival at heart. During a recession, you should make sure all miscellaneous business expenses are made based on corresponding sales.
Some experts prefer to call this technique “bootstrapping.” For instance, suppose you need some new office equipments or you need to pay certain bills; you should strive to make sure that such expenses are made from the sales generated within that period of time.
Never pull out money from your reserve to settle such bills or expenses. If the sales are not forth coming, then you need to put in more effort with respect to marketing.
Most small businesses operate without Strategic Plans. If your business operates without a strategic plan, then I am sorry your business cannot survive a recession. There is always a big difference between businesses that operate on strategic plans and those that don’t. So the earlier you begin to run your business on strategic plans, the better for you.
“The most important ‘speed’ issue is often not technical but cultural. It’s convincing everyone that the company’s survival depends on everyone moving as fast as possible.” – Bill Gates
One of my favorite companies is Apple Corporation. I love their management style and I try to model my business after theirs. Apple is known for its creativity and innovative products but I want you to know that constant innovation is a part of their overall strategic plan to stay relevant in the market. I also run my businesses on strategic plans forged by my strategic business team.
“In three years, every product my company makes will be obsolete. The only question is whether we will make them obsolete or somebody else will.” – Bill Gates
During the recession, our overall strategic plan was focused on one thing “business survival.” Since I was the Chief of Strategy on my team, it was my responsibility to oversee the creation and implementation of these business recession survival strategies. To be sincere with you; the global economic recession made me further appreciate the importance of a business team.
“My most important word in business is ‘Strategy’ and the reason is this: The speed at which your business grows is directly proportional to the overall strategy deployed on that business and the team behind the creation of that strategy.” – Ajaero Tony Martins
The major reason most small businesses failed during the recession was because they tried to survive by acting alone. Imagine trying to navigate a ship through the storm alone; it’s almost next to impossible. To survive a recession, you need to sail through the storm as a member of a team.
“Individuals don’t win in business; teams do.” – Sam Walton
“There is only one boss; the customer. And he can fire everybody in the company, from the chairman down, simply by spending his money somewhere else.” – Sam Walton
Do you know that your customers are your company’s greatest assets? Without them, your business will not be in existence. From analysis carried out by the marketing experts, it has been reveal that it costs more effort and resources to find new customers than to retain existing ones.
“Business is not just doing deals; business is having great products, doing great engineering and providing tremendous service to customers. Finally, business is a cobweb of human relationship.” – Henry Ross Perot
What if your customers abandon your business during a recession, will your business stay afloat? I leave you to answer the question. If you must know; existing customers are the most important key to surviving a recession. Treat them with care and they will spread the word about the wonderful experience you gave them.
“Courteous treatment will make a customer a walking advertisement.” – James Cash Penny
One of our recession survival strategies was to stay true to our customers. We established a closer relationship with them; provided excellent services and dealt with customer’s complaint with utmost priority.
“Spend a lot of time talking to customers face to face. You will be amazed at how many companies don’t listen to their customers.” – Henry Ross Perot
We did this because we knew the implication of losing one customer and beside that; our competitors were looking for an opportunity to poach our customers so we had to be on guard. If you interested in learning how to keep your customers loyal and happy, the articles below will be helpful.
“Customer service will become the primary value added function of every business.” – Bill Gates
This is not only applicable during a recession but also when you are experiencing difficulties in business. When the effect of the global economic recession became too severe, companies started laying of thousands of workers. I felt compelled to do the same but I didn’t.
I called a meeting of all my employees. I explained to them the present situation on ground and the need to take drastic measures. Most of my employees were expecting me to announce their laying off since they had already seen it take place in other companies.
“Well yes, I have fired a lot of people. Generally I like other people to fire because it’s always a lousy task. But I’ve fired many people.” – Donald Trump
Instead of acting the way they expected, I told them my company was committed to their social security and welfare. I told them that everyone, including myself was going to take a salary cut but I also added a catch to it and the catch was this: “if they worked hard with me to help the business survive the trying period, all outstanding balance resulting from the salary cut will be compiled and paid to them gradually when the business recovers.”
“People are definitely a company’s greatest asset. It doesn’t make any difference whether the company’s product is cars or cosmetics. A company is only as good as the people it keeps.” – Mary Kay Ash
After that meeting, I saw a new kind of commitment in my employees. They went about their duties with a new feeling of responsibility for my business. They knew I had done them a favor by not laying them off so they worked harder and smarter to show their gratitude. My business ultimately became their business.
“We treat our people like royalty. If you honor and serve the people who work for you, they will honor and serve you.” – Mary Kay Ash
So when faced with a similar situation, you need to get creative. Show your employees love and they will commit themselves to your business.
“We were most creative when our back was against the wall.” – Anita Roddick
In any business, you have to provide exceptional service to the customer so he/she will be able to buy from you. If you do this well, that customer will come back and buy from you even if times are tough. Customer service is a vital key to getting repeated sales; and repeated sales is essential to surviving a business recession.
Of all the business recession survival strategies that exist; focusing on the customer is the best and most effective strategy that can guarantee long term stability for your business. Now how do you focus on customer service? You can focus on customer service by going all out to make every time spent by your customer in your office or store worthwhile. You can focus on customer service by touching the customers at the point of their needs. Exceptionality should be watchword when dealing with customers.
Now how do you achieve exceptionality in your customer service? The basic key to achieving exceptionality in the way your business handles its customers is to train and re-train your employees on customer care and service delivery. By retraining your staff and making sure they understand the fact that providing exceptional customer service is the only way your business can survive a recession; you are strengthen the bottom line of your business.
You can train your employees by hiring someone from the outside to handle a seminar or workshop. If this is not within your budget, do it yourself and also give them a refresher course on the products or services that you are offering.
If you fail at improving or maintain a good level of customer service; if you fail to take care of your customers and meet them at the point of their needs, then every other recession survival strategy you implement will be null and void in the long run. If your employees fail at the frontline; the customer will just go in and walk out, never to come back.
Are going to cut back on salaries? Will an increase in productivity keep your business afloat? If your answer to these questions is yes; then lead by example. If you are going to increase work time and cut back on salaries; start with yourself. Take a pay cut and work longer hours; this way, your staff will see the amount of effort you put in and with that, nobody will have the right to complain.
Are there other tactics to surviving a business recession? My answer is yes. You can talk to other business owners within or outside your industry and see what they are doing to stay afloat. Some of the steps they have taken may be applicable to your situation but you will never know until you try.
As a final note, I want to let you know that preparation is the key to surviving a recession. If we hadn’t been prepared, we won’t have survived the recession. We planned, prepared and withstood the recession using the same business survival strategies shared above. If my businesses could survive a recession despite its limited budget and capital; I am sure yours can achieve the same.
As a side note, I want to add that staying afloat and surviving a business recession requires a little bit of creativity. There are other ways to stay afloat during a recession that can be applicable only to your business or industry so it’s up to you to figure out such.